Blockchain: Emerging Technology Offers Benefits for Some Applications but Faces Challenges

What GAO Observed

Blockchain brings together many technologies to supply a trustworthy, tamper-resistant report of transactions by many get-togethers without the need of a central authority such as a financial institution. Blockchain can be employed for a range of fiscal and non-financial purposes, like cryptocurrency, supply chain management, and legal records. GAO observed that blockchain is useful for some programs but confined or even problematic for others. For example, due to the fact of its tamper resistance, it may well be helpful for purposes involving quite a few participants who do not necessarily belief each individual other. But it may well be overly advanced for a couple reliable customers, exactly where standard spreadsheets and databases may be a lot more helpful. Blockchain may possibly also current stability and privacy problems and can be electricity-intensive.

Blockchain has a huge variety of prospective non-monetary employs (see determine).

Blockchain has numerous opportunity non-monetary purposes

For example, it could be made use of to manage source chains, create much less hierarchical corporations, and doc title registries for real estate. On the other hand, most these kinds of initiatives are not however past the pilot phase and face troubles. For instance, most blockchain networks are not developed to be interoperable and cannot connect with other blockchains. Corporations that want to use blockchain also confront legal and regulatory uncertainties, and have located it tough to uncover skilled personnel to carry out blockchain.

Economic applications of blockchain have the possible to decrease costs and increase access to the economical technique, but they also confront multiple problems. Cryptocurrencies, very likely the most extensively known application, are a electronic representation of value guarded by cryptographic mechanisms, which facilitates payments. Some are acknowledged for volatility (i.e., frequent or swift variations in value), but a style recognised as stablecoins may perhaps aid lessen this risk. In the same way, an rising region acknowledged as decentralized finance features products and services this kind of as blockchain-dependent lending and borrowing, which also deal with several troubles. For case in point, blockchain-centered financial apps can facilitate illicit exercise, could cut down shopper and investor protections compared to standard finance, and, in some instances, are subject to unclear and complicated principles.

GAO designed four coverage choices that could enable increase positive aspects or mitigate troubles of blockchain systems. The coverage solutions detect feasible steps by policymakers, which could contain Congress, federal companies, point out and regional governments, educational and exploration establishments, and field. In addition, policymakers could decide on to maintain the status quo, whereby they would not choose added motion outside of any current efforts. See underneath for details of the plan options and related opportunities and factors.

Plan Alternatives That Could Assistance Boost Gains or Mitigate Challenges of Blockchain Technologies

Supply: GAO. | GAO-22-104625

Why GAO Did This Research

Economies count on central authorities and trusted intermediaries to facilitate business enterprise transactions. Blockchain is a technologies that could lessen the will need for these types of entities although setting up a program of verification. It could possibly thus improve a range of economical and non-financial apps. Nevertheless, the use of blockchain systems raises a range of ethical, legal, economic, and social concerns.

GAO was questioned to carry out a technological innovation evaluation on the use of blockchain, with an emphasis on foresight and policy implications. This report discusses (1) non-economic apps of blockchain, including probable positive aspects and challenges, (2) money applications of blockchain, including potential positive aspects and challenges, and (3) policy selections that could help increase advantages or mitigate difficulties of blockchain systems.

GAO assessed blockchain programs designed for or applied in finance, governing administration, offer chain management, and firm administration interviewed a variety of stakeholder teams which include government, business, academia, and a venture money organization convened a conference of gurus in collaboration with the National Academies of Sciences, Engineering, and Drugs and reviewed crucial stories and scientific literature. GAO is determining plan solutions in this report.

For extra facts, get in touch with Karen L. Howard at (202) 512-6888 or [email protected].